Permitting delays put ConocoPhillips’ GMT-2 timeline in jeopardy

It’s taking longer than ConocoPhillips planned to get approval for its second oil development in the National Petroleum Reserve-Alaska, which could delay production from the project by at least a year.

The company hopes to have the $1 billion-plus Greater Mooses Tooth-2 project producing by the end of 2020. Once fully developed with 33 wells, GMT-2 is expected to generate up to 30,000 barrels of oil per day.

ConocoPhillips Alaska President Joe Marushack said Jan. 13 during a speech at the Alaska Support Industry Alliance annual convention in Anchorage that the project’s timeline is being strained by unexpected holdups in securing federal environmental permits.

ConocoPhillips submitted its proposal to develop GMT-2 to the Bureau of Land Management, the agency that oversees the NPR-A, in August 2015. However, BLM did not publish a notice of intent in the Federal Register to officially restart the environmental impact statement, or EIS, for the project until 11 months later in July of last year.

ConocoPhillips Alaska Vice President of External Affairs Scott Jepsen characterized the project as “pretty close to being a carbon copy” of the company’s Greater Mooses Tooth-1 project under construction this winter in the NPR-A, in an interview following Marushack’s comments.

First oil from GMT-1 — also a project with peak production estimated at about 30,000 barrels per day — is pegged for late 2018. Both projects should require about 700 laborers during the height of construction, according to the company.

The GMT-2 road would extend southwest into the reserve from the GMT-1 pad.

BLM published the notice of intent for GMT-1 about three weeks after ConocoPhillips submitted its development plan to the agency, Jepsen said. That led to a 19-month timeframe from the initial proposal to when the record of decision approving the development was issued.

On GMT-2, the BLM is anticipating a record of decision between January and May 2018, according to the agency’s Alaska spokeswoman Lesli Ellis-Wouters, which would make for an EIS process of at least 29 months.

Jepsen said the producer hopes to get a record of decision by late this year so it can sanction the project as soon as possible.

“If we miss investment in the fourth quarter of 2017 we basically delay the project a year,” he said, due to long lead time materials and the need to get them staged before the following winter construction season.

Marushack said GMT-2 is competing internally against the company’s other projects worldwide for limited capital dollars and delaying the investment just challenges the project further.

He also announced the company’s latest discovery in the NPR-A — the Willow discovery, which ConocoPhillips estimates could produce up to 100,000 barrels per day with production starting in 2023 if it can be developed expeditiously. Willow is also in the Greater Mooses Tooth unit.

Ellis-Wouters wrote in an email to the Journal that the agency responded to “major reservations about the GMT-2 project” from the Native Village of Nuiqsut near the proposed development. The village also asked the agency to delay its review of the project.

“The BLM took time to consult with the Native Village of Nuiqsut and respond to that request, explaining that there is a statutory obligation to respond to Conoco’s submittal of an application for permit to drill, but the BLM will consider and address (the village’s) concerns during the NEPA (National Environmental Policy Act) process,” Ellis-Wouters wrote.

She added that it was appropriate for the agency to address the village’s concerns prior to publishing the GMT-2 notice of intent.

The agency is also strained by personnel limitations and high employee turnover; it hired a manager for GMT-2 just a month before issuing the July 2016 notice, Ellis-Wouters noted.

Kuukpik Corp., the Native village corporation for Nuiqsut, wrote in a September 2016 formal comment letter on GMT-2 that the corporation would not take a position on the project, but also emphasized that “Nuiqsut itself is one of the most traditional and subsistence-dependent communities on the North Slope.”

The supplemental EIS for GMT-2 that BLM is working on now is a follow-up from one done in 2004 when the project was first proposed as a satellite to the company’s large Alpine field on state acreage just to the east of the NPR-A.

The footprint of Conoco’s updated plan for GMT-2 is larger than what it got approval for in 2004, with an 8.1-mile access road and a 14-acre drill pad capable of holding up to 48 wells, according to the proposal submitted to BLM.

Exploration well delayed

Separate from the Greater Mooses Tooth projects, ConocoPhillips has decided to hold off on drilling an exploration well on its newly acquired acreage in the Colville River unit.

The company and its minority-share partner in the unit Anadarko Petroleum Corp. were awarded about 9,100 acres of the former Tofkat unit in November when DNR Commissioner Andy Mack reversed an earlier decision by former Oil and Gas Director Corri Feige to deny the Colville expansion.

ConocoPhillips acquired the acreage from independent Brooks Range Petroleum, which held the Tofkat leases for several years but defaulted on them because the small company was never able to drill the exploration wells it said it would.

When Mack approved the action ConocoPhillips said it would try to drill an exploration well called Putu this winter if it could get the appropriate permits in time.

Company spokeswoman Amy Burnett wrote in an email that a decision to hold off on the well until early 2018 was made at the request of Nuiqsut leaders.

“This decision was a collaborative process with Nuiqsut leaders that recognized the need to balance drilling opportunity with the needs and support of the community,” Burnett wrote. “ConocoPhillips plans to actively engage the Nuiqsut community ahead of the 2017-2018 exploration season to ensure that the exploration drilling project is well understood and questions from the community are thoroughly addressed.”

The Tofkat-Colville acreage is adjacent to the Pikka unit operated by Armstrong Energy. Armstrong and its Spanish major partner Repsol are permitting for development of their Nanushuk project, which they estimate could produce up to 120,000 barrels per day.